Trying to value a park where are 80% of the homes are straight rentals, and by that I mean there is no path to ownership in place. No lease-option, no rent-to-own, no rent-credit program.

My understanding about why we should never cap home rent income boils down to the two main points

you can end up with a value for the home higher than what it would cost to bring a home in (example: home rent is $300/month x 12 months x 10 cap = $36000, but you could buy and bring a home in for less than that, so you are paying too much)

on any of the path-to-ownership programs, that payment will go away someday! Tenant might complete the program 3 months after you buy the park and now you no longer see that payment that you paid for.

For the park I’m looking at, at least this second part is not true, the park really owns the homes. Here’s some simplified math:

Do your typical Park valuation but need to increase expense ratio 20-30% as part of that to cover the POH maintenance. Then inspect all the POH to come up with a blended average for them. If the 40 POH have a 5K blended average value (what you can easily sell them for as they sit today) then add 200K as a line item to your Park value.

Also consider the value of the home if the title is missing…minus 3-5K IMHO if I have to deal with state paperwork processes.

Park and home ownership are two different businesses. Just like MH and RV parks are different businesses. I suggest you propose to the seller putting the homes in a separate company/LLC and letting the seller keep running those as a tenant of yours since he never learned that rentals are a bad idea.

We got into this biz to AVOID experiences like being class D apartment landlords, yet this is what you are proposing for yourself. We like tenants who own their homes, vs. apartment renters who own nothing and will leave in the middle of the night.

If you buy them, value them at their wholesale value per NADAguides or comps. Homes built before 1990 have very little residual value, regardless of the rents. Homes built before 1980 may have NEGATIVE value if you have to pay to remove/recycle them.

Remember, lenders won’t give you much, if any, credit for park-owned homes. So the seller had BETTER be willing to carry a note on those, and the terms had better be good enough to allow you to compensate for the expenses and vacancies created by P-oH’s. Your expenses on the homes could easily be 50% of income.